What Does 51% Sports Betting Tax Rate Mean For New York Bettors?

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The cost of being in the sports betting business in New York is steep. What does that mean for bettors in the state when mobile sportsbooks launch on Saturday?

Four sportsbooks were given the greenlight to open for business and start accepting mobile sports bets January 8, at 9 a.m ET — Caesars Sportsbook, DraftKings, FanDuel, and BetRivers. BetMGM New York launched its app for the state’s sports bettors Monday, Jan. 17.

Can sports bettors in New York expect to see a higher cut of losing wagers (known as the vigorish or “vig”) taken by sportsbooks?

With the NFL Playoffs kicking off January 15 and the Super Bowl (and all the tasty betting that comes with that mega-event) looming next month, mobile sports betting in New York is changing the landscape of the industry and provide new opportunities for fans in the state.

Why It’s Expensive To Operate a Sportsbook in New York

The tax rate sportsbook operators pay on revenues vary widely per state, but at 51% percent, New York is on the high end of that range. As a result, operators will need to be exceedingly creative to squeeze all they can out of the margins in New York.

Things could have been worse: a data table prepared by the New York State Gaming Commission in 2020 indicated that if there had been fewer sportsbook licenses (each of which cost a record $25 million), the tax rate could have approached 70 percent. More sportsbooks means more competition and a lower overall tax rate, which means better bonuses and offers to the player.

As it is, nine sportsbooks have been licensed by New York, each required to pay more than half of its adjusted revenue to the state in taxes. By contrast, neighboring Pennsylvania charges a 34% tax rate, and New Jersey levies a 13.5% tax rate on mobile sports betting in their states, according to research by the Tax Foundation.

In addition to the five operators that have already launched, PointsBet, BallyBet, Resorts World, and WynnBet have also been granted New York licenses.

Alternatives for New York Sports Bettors

According to an independent study funded by DraftKings and FanDuel, 18.2% of wagers placed in New Jersey in 2019 and as much as 25% of the bets placed on the NFL were made by residents of New York who crossed the state line.

With such a large piece of the sports betting activity in New Jersey coming from New Yorkers, what will that mean to the Garden State when mobile sports betting debuts in the Empire State? How many New York bettors will choose to stay home to bet on sports?

New Jersey and other neighboring states figure to see a decrease in sports betting activity once New York goes live. But, should sportsbooks make it expensive to bet in-state, New Yorkers could still look elsewhere.

That could also mean the black market and continuing to wager with illegal local bookmakers.

New York Will Receive Hefty Tax Revenue From Sports Betting

The New York State Gaming Commission projects the sports betting market in the state to bring in as much as $1 billion in annual gross gaming revenue (GGR). With the 51% tax rate, that translates to more than $500 million in tax revenue for the state treasury. As they say: a hundred million here, a hundred million there, pretty soon, you’re talking about real money.

No Indication Sportsbooks Will Gouge Customers

Thus far, on the cusp of mobile sports betting launching in New York, there’s no indication operators will raise their cut on the action to compensate for the high tax rate. One source at a sportsbook that will operate in New York told Gaming Today there are no plans to waiver from the standard -110 vig for sports betting in the state.

FanDuel CEO Mike Raffensperger said the same on New York radio Friday.

Sportsbooks could be more focused on the potential volume and luster of the New York sports betting market. The well-established brands lined up to do business in New York, cost be damned, recognize that to be an industry leader, they have to be in the biggest market in the United States. They can also count on large volume to help offset the lower margins on sports betting operations in New York.

If any of the nine licensed sportsbooks in New York decide to raise the vig beyond, for example, the standard -110 on point spread bets (which requires a bettor to risk $110 to win $100), there could be backlash in what should be a celebration of the opening of a huge market. In search of more favorable prices, New York bettors may keep crossing the bridge to Jersey or placing sports bets with their neighborhood bookie.

It’s always possible that sportsbooks may throttle back their promo offers in New York after the initial honeymoon period of launch is over. As a result, their bottom lines can look a bit better in a state that charges them steep “rent” to operate.

About the Author
Dan Holmes

Dan Holmes

Writer and Contributor
Dan Holmes is a writer and contributor for Gaming Today with plenty of experience under his belt. Dan has written three books about sports and previously worked for the National Baseball Hall of Fame and Major League Baseball. Currently, Dan is residing in Michigan with his family.

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